Finance Content

Budgeting is obviously one of the most effective ways to meet profit goals and avoid maverick spend. Budgeting and planning help organizations invest their resources to best benefit, based on cautious consideration rather than the urgency to make a short-term decision. They are essential to sustain your company's economic growth. But how do you close the loop between budget preparation, execution and forecast? This can be a challenge. Like William Feather said, “a budget tells us what we can't afford, but it doesn't keep us from buying it.”

When I first came across “payment terms” outside of a classroom setting it was in Japan in the ‘90s. I must admit, from my vantage point in domestic (domestic Japanese, that is) sales engineering activities, I found it rather confusing. As I recall (translated of course), the terms given to us, a Tier 1 supplier to a leading Japanese manufacturer, went along these lines: “50% of the amount owed will be paid in cash two months after the end of the month following the month the invoice is presented and the balance will be paid 3 months after that.” Try telling that to a typical payables clerk in the US to have them explain to suppliers.

I’ll level with PRO subscribers: while we wanted an aspirational message for the general attending public, achieving the Hollywood ending is not easy – and in fact, few organizations truly succeed in joining finance and procurement at the hip. But there are some critical steps necessary that can help an arranged marriage of the two along, even if it’s not love at first site, and at the very least, to avoid a costly divorce. Note to the procurement executives reading this brief: 95% of the time, CPOs will not end up on the positive side of things when finance and procurement fail to collaborative effectively.